- POSTED: 23 Dec 2013 17:14
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Indonesia is set to ban raw mineral exports next year but analysts say the move could worsen the country's trade and current-account deficit and cost billions of dollars in revenue losses.
JAKARTA: Indonesia is set to ban raw mineral exports next year but analysts say the move could worsen the country's trade and current-account deficit and cost billions of dollars in revenue losses.
Indonesia, the world's largest mined nickel producer, wants to ban exports of mineral ores by January 12 to push miners to do the lucrative work of refining within Indonesia instead.
Citigroup says the move could worsen the country's current account deficit by as much as 0.3 per cent of GDP, and cost at least US$5 billion in export losses next year.
Still, the government appears to be firmly fixed on the long term gains.
"In the short term, there will be a reduction in production. Of course the state will temporarily lose national revenues, but if we follow through with our plans then we will have a trade surplus again in our mineral exports in 2016," said Coordinating Minister for Economic Affairs Hatta Rajasa said.
Miners are upset by the move, particularly because they were not consulted.
Andrew White, managing director at the American Chamber of Commerce, said: "That regulation was issued abruptly without stakeholder consultation. The fact of the matter is globally today, there's a glut of smelters. It takes some three to five years to build a smelter. They cost anywhere between US$1 billion and US$4 billion just for the smelter itself.
"(This does) not include the infrastructure around (the smelter) so that regulation really doesn't make any practical sense."
There also appears to be some uncertainty as to how the ban will be implemented.
The deputy minister of energy and mineral resources has suggested Indonesia might allow miners committed to building new smelters to continue exporting mineral ores for several years.
Mining giant Freeport-McMoRan is seeking a way around the ban that could see its production cut by 60 per cent or its operations stopped completely.
The Indonesian Chamber of Commerce and Industry says some 800,000 workers employed directly or indirectly in the mining industry could lose their jobs.
Others such as mineral entrepreneurs are calling on the government to prepare the necessary infrastructure and create a clear roadmap to facilitate Indonesia's move up the value chain.
Agus Suhartono, vice chairman of the Indonesian Association of Mineral Entrepreneurs, said: "How can we begin shifting our competency from the mineral to the metals if there is no or uncertain underlying strategy of the country. That's the most important.
"If you want to shift the national competency from mineral to metals, then we should look our local capability first."
The government is planning to draw up a detailed plan on how the mineral ore export ban will be implemented next month.
Meanwhile, the Association of Mineral entrepreneurs says it will file a class action lawsuit against the ban and propose a judicial review of the Mining Law.